In the quarterly reports they will release this week, Verizon (VZ) and AT&T (T) will likely indicate their increasing dominance in the U.S. cellular market.

Last year, Verizon shares trailed the broader market, rising just 8% versus the Standard & Poor's 13.4%. AT&T fared not quite as badly, rising 11.5%. The 5% dividend yield on Verizon and the 5.4% yield on AT&T somewhat make up for those trailing returns.

Both companies have already disclosed they hit new records for smartphone sales in the quarter that ended last month. Verizon CEO Lowell McAdam told investors at a technology conference on Jan. 7 that, out of the record 2.1 million contractual customers the company signed up, 85% bought a smartphone. Not to be outdone, AT&T the very next day issued a news release saying it topped 10 million smartphone sales.

That's a harbinger of more good news: Verizon and AT&T seem to be making the best of having a substantial lead in so-called long-term evolution, or LTE, the faster wireless broadband speeds that come with the latest smartphones. As the companies sign new customers, they are seeing a surge in the data used by those phones, which presages incremental revenue that could help them start reaping the rewards from billions in investment in their LTE networks.

Analysts point out that while LTE smartphone users are now 23% of all Verizon smartphone users, LTE traffic accounts for half the data of all Verizon Wireless customers. Verizon has said it is seeing a tick up in the number of customers adding multiple devices to its network through shared data plans.

Both companies are far ahead of the competition in LTE, with Verizon able to offer fast service to 274 million people and AT&T covering 170 million.
Sprint-Nextels -1.749271137026239%Sprint Corp.U.S.: NYSEUSD3.37
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N/AMarket Cap
13370090319.8945
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N/ARev. per Employee
1113940More quote details and news »sinYour ValueYour ChangeShort position
(S), the third largest carrier, is "at the early stages of 4G LTE deployment," according to a recent report by National Securities analyst Bruce Roberts. The T-Mobile USA unit of
Deutsche Telekom
(DB), fourth in scale, is just starting to roll out LTE, according to Roberts.

Now, those smartphone sales weigh on profits because they come with hefty subsidies. However, I've a feeling that investors will look past that fact, which they already understand all too well, and rather reward the increased dominance of AT&T and Verizon.

The two industry leaders may also benefit—at least initially—from consolidation among smaller providers. As the small fry busy themselves with dealmaking, Verizon and AT&T will be scooping up LTE customers.

The acquisitions are happening apace. Sprint is in the midst of what has become a battle to take over its broadband partner,
Clearwire
(CLWR). Japanese carrier
Softbank9984.to -0.20304568527918782%SoftBank Group Corp.Japan: TokyoJPY6881
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12.365668691370448Market Cap
8261744040375
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0.5813108559802355% Rev. per Employee
131061000More quote details and news »9984.toinYour ValueYour ChangeShort position
(9984.Japan) acquired a 70% stake in Sprint last fall, giving Sprint the cash it needed to buy the 49% of Clearwire Sprint doesn't yet own. Sprint offered $2.97 per share, a modest premium, last month. But satellite provider
Dish NetworkDISH -0.5694059710680209%DISH Network Corp. Cl AU.S.: NasdaqUSD64.61
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N/ARev. per Employee
777548More quote details and news »DISHinYour ValueYour ChangeShort position
(DISH) earlier this month stepped up with a competing (and unsolicited) bid of $3.30. A report by Bloomberg on Friday said that Sprint now has to contend with some large minority investors in Clearwire that are demanding a higher price.

T-Mobile's expansion plans, meanwhile, hinge on a merger with
MetroPCS
(PCS). T-Mobile will be similarly tied up this year as the two firms sort out some $7 billion in "synergies" the deal is supposed to provide.

One example was Otellini's performance last Thursday, as Intel (INTC) reported fourth-quarter revenue that met expectations, but included a forecast for this year's sales growth that was a bit below what Wall Street had been predicting.

When asked by analysts why Intel is spending even more this year to outfit its factories for more-advanced chip production—an amazing $13 billion, up from $11 billion last year—even though the PC market outlook remains poor, Otellini's reply was sly.

"We're branch predicting," he said.

Come again? Branch prediction is technical jargon for when a computer chip tries to anticipate the next event in a computer program in order to plan how to use its circuitry efficiently.

In other words, Intel is betting that newfangled hybrid computers—a device that melds traditional PCs with tablets—will save the PC industry and rejuvenate Intel's microprocessor sales. It's a guess, albeit an educated guess. Think of a chess player pondering, "Will my opponent move rook or bishop?"

Needless to say, Wall Street does not like branch prediction, or any other form of uncertainty, especially when it costs $13 billion. Intel shares dropped 6% the next day, closing at $21.25.

Nor does the Street like branch predicting who will run Intel when Otellini moves on. Moreover—though he has done a fine job running Intel for several years—investors have decided that Otellini is in fact predicting the wrong branch. The stock price at this point reflects a belief these hybrid computers will largely fail, and people will instead continue to spend their disposable income on tablets and smartphones.

Otellini's prediction sounds more like a Field of Dreams or the old "Hail Mary" pass for a stock that's fallen more than 15% in the past year. We hope that Intel has predicted right and that the PC hybrids surprise and delight investors with their success.

But the evolution of tablets and smartphones, which make up another main branch on that tree, continues to grow and sprout new buds. That means there will likely be more bad news in coming months for the plain-old PC, even if Intel's bet at some point proves wise.

Intel's shares aren't pricey. Shares closed on Friday at $21.25, trading at less than 10 times forward earnings, after factoring in about $3.57 per share in cash and investments.

But further bad news on the PC front—or too much good news from the tablet and smartphone branch—could make Intel fall further before there's any reprieve.